Treasurer Joe Hockey on Tuesday announced a temporary 2% tax on high income earners to help close the budget deficit; cuts to family welfare benefits; increased health costs; and higher fuel taxes. He also lifted the retirement age to 70 from 67.

Consumers, Macquarie Private Wealth said in its assessment of the budget, were the “clear losers.”

A lot of the budget blows will be phased in over time, but some economists warn they’ll sour confidence and hit the economy at exactly the wrong time. And Aussie consumers’ mood already was grim: A survey by ANZ Bank showed consumer confidence fell an astonishing 11% in the three weeks before the budget presentation to its lowest level since May 2009, as public debate focused on potential tax increases, higher health costs and fuel price hikes.

Perhaps the dark mood will lift now that the budget details are known. And with the document still set to go to the Senate — where minor parties and independents hold the balance of power – it’s not clear how many of the government’s proposals will ultimately see the light of day.

But economists warn that any weakening of consumer spending could remove a key support for an economy seeking new sources of strength as a decade-long mining boom wanes.

“We are watching this risk carefully,” said Kieran Davies, chief economist for Australia at Barclays Capital.

In recent years Australia’s economy has been powered by record levels of mining investment, but that has peaked and will fall for several more years as massive gas projects are completed.

Macquarie, in its research note, said tighter fiscal policy would likely restrain household spending, but “the positive offset is monetary policy, with official cash rates likely to be on hold for a longer period than would have been otherwise.”

The RBA hopes low rates can revive consumer spending and boost other non-mining sectors such as housing construction. If not, the central bank will probably have to rejig its outlook. Earlier this month the central bank forecast the economy to grow 2.75% this year, not enough to really drive down unemployment from near 10-year highs.

But Credit Suisse says government forecasts are overly optimistic and that the budget will create a sizeable headwind, holding GDP growth below 2% next fiscal year. The government expects GDP growth of 2.5% in 2014-15.

“The government needed to offer more stimulus to maintain trend-like real GDP growth,” and the RBA will need to cut interest rates further, Credit Suisse said in a research note.

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